Oct. 23, 2007 - Wausau Paper today reported net earnings for the third quarter of $6.1 million, or $0.12 per share, compared with $7.2 million, or $0.14 per share, the year before. Net sales increased 4 percent to a record $319 million, while shipments increased slightly to 235,000 tons.

Third-quarter results included an after-tax gain of $1.8 million, or $0.03 per share, from the sale of timberlands and stock incentive credits of $0.6 million, or $0.01 per share. Prior-year third-quarter results included after-tax timberland sales gains of $4.1 million, or $0.08 per share, and stock incentive charges of $0.5 million, or $0.01 per share.

Commenting on third-quarter results, Thomas J. Howatt, president and CEO said, “Net sales reached record levels for a second consecutive quarter with all three of our business segments achieving year-over-year sales improvement. We continue to increase share in several target markets as recently introduced products, such as our new 100 percent recycled Dubl-Nature® Green Seal®-certified towel and tissue line, gain position with key customers.

Printing & Writing reported a third-quarter operating loss of $1.3 million compared with profits of $1.1 million last year. Net sales and shipments increased 9 percent and 10 percent, respectively, with most of these gains occurring in non-core products. “Despite our recent success penetrating attractive markets and achieving operating efficiency gains and cost reductions, Printing & Writing’s profitability continues to be limited by secular decline in the demand for uncoated freesheet papers and chronically over-supplied markets in North America, exacerbated by escalating input costs, most notably market pulp,” explained Howatt.

"At its October meeting, the Board of Directors approved a three-part plan to return Printing & Writing to profitable levels within the next several quarters and achieve returns that exceed our cost of capital by the end of 2009. This plan includes the permanent closure of the Groveton mill, a sales and marketing effort focused on core products and brands, and an assessment of strategic investment alternatives to enhance capabilities and reduce costs in our Printing & Writing system. Execution of these plans substantially removes our exposure to unprofitable commodity paper and other non-strategic business while further supporting our strategy to provide value-added products and benchmark service to our core customers.”

The company plans to cease manufacturing operations at its Groveton, New Hampshire mill effective December 31, 2007, reducing annual Printing & Writing production capacity by approximately 105,000 tons or 28 percent. The shutdown will affect approximately 300 permanent jobs. Pre-tax closure charges are estimated to be approximately $72 million with non-cash charges, primarily related to the write-down of long-lived assets, accounting for approximately $41 million of this total. Pre-tax closure charges of approximately $52 million are expected in the fourth quarter with the remaining charges of $20 million occurring during the first half of 2008. After considering income taxes and an anticipated reduction in working capital, the impact of the closure is expected to be cash-neutral on a cumulative basis.

“This capacity reduction will allow our sales and marketing efforts to focus on customer service as well as strategic products and brands such as Astrobrights®, Royal®, and Exact®, and better support our core stock-based and special manufacturing business,” continued Howatt. “With the production capabilities provided by our Brokaw, Wisconsin, and Brainerd, Minnesota mills, Printing & Writing will continue to provide the same breadth of product and superior service that customers have come to expect, including regional distribution on the East Coast. In addition, we are developing capital investment plans to further strengthen our long-term competitiveness and will share those details as specifics are available.”

Wausau Paper’s Specialty Products business reported third-quarter operating profits of $2.2 million compared with operating losses $0.3 million last year. Net sales increased 1 percent, while shipments declined 6 percent, with half of the decrease due to reduced roll-wrap sales volumes. “We are encouraged by the year-over-year profitability improvement achieved by Specialty Products. The success of our selling price and mix upgrade initiatives allowed us to offset market pulp cost increases of $3 million and balance somewhat weaker demand in markets tied to the industrial and homebuilding sectors of the U.S. economy,” Howatt said. “Our focus remains on pursuing attractive niche market opportunities such as those offered in food service/packaging and driving long-term profitability by increasing operational efficiencies and maximizing mix upgrade opportunities, which are being driven by the pace of new product introductions.”

Towel & Tissue’s third-quarter operating profits of $11.1 million were modestly lower than record third quarter profits of $11.5 million reported last year. Net sales increased 1 percent while shipments declined 2 percent due primarily to reduced commodity-oriented product volumes. “Despite slightly lower earnings, we remain very pleased with the profitability of our Towel & Tissue business,” Howatt said. “Selling price increases and mix enhancement nearly offset higher manufacturing costs—most notably a 50 percent increase in wastepaper—enabling us to maintain strong operating margins. With the ‘away-from-home’ towel and tissue market expanding minimally in 2007, pricing has become highly competitive and profitability limited in commodity-oriented product categories. As a result, we continue to emphasize growth in higher-margin value-added products where we have increased shipments by 6 percent through the first nine months of the year. This growth continues to be driven by innovative products such as our EcoSoft® Green Seal™ and OptiCore® product lines.”

The company sold approximately 1,600 acres of timberlands in the third quarter, continuing progress on its program to sell 42,000 acres of non-strategic timberlands. A total of 23,000 acres remains in the sales program. Also during the third quarter the company repurchased 314,000 shares of common stock at a cost of $3.4 million, and has approximately 1.1 million shares remaining under a previous board authorization.

For the first nine months of 2007, Wausau Paper reported net earnings of $25.8 million, or $0.51 per share, compared with net earnings of $10.3 million, or $0.20 per share the year before. Current year results included after-tax timberland sales gains of $4.0 million, or $0.08 per share; one-time state tax benefits of $11.6 million, or $0.23 per share, related to the January 1, 2007, restructuring of the company’s subsidiaries; and stock incentive credits of $0.6 million or $0.01 per share. Year-ago nine-month results included after-tax timberland sales gains of $5.8 million, or $0.12 per share, and stock incentive charges of $1.3 million, or $0.03 per share. Net sales increased 5 percent to $936 million while shipments increased 1 percent to 699,000 tons.

Commenting on the fourth-quarter outlook, Howatt said, “Fiber prices continue to rise and signs of economic weakness are emerging as we enter the seasonally weaker fourth quarter. That said, performance by our Towel & Tissue unit remains strong and momentum gains continue in our Specialty Products business. At the same time, conditions in Printing & Writing remain unchanged as we begin to focus on our recovery plan. As a result, we expect fourth-quarter earnings comparable to prior year excluding timberland sales gains and charges associated with the closure of the Groveton mill. Fourth-quarter 2006 results were $0.04 per share excluding timberland sales gains of $0.10 per share.